Presidio Bank (OTCBB: PDOB), a Bay Area business bank, today reported unaudited results for the fourth quarter and full year ended December 31, 2017 with Net Income for the year of $5.5 million, up 22% from 2016, despite a $1.5 million revaluation of Deferred Tax Assets and Low Income Housing Investments in the fourth quarter due to the recently passed tax reform legislation. Pretax Income for the 2017 was $11.3 million, up 53% from 2016. Pretax Income for the quarter ending December 31, 2017 was $3.4 million, flat to the quarter ending September 30, 2017, but up 75% from the quarter ending December 31, 2016. Total Assets were a record high $794 million at December 31, 2017, up $8 million from September 30, 2017 and up $47 million or 6% from December 31, 2016.

“A combination of continued growth, improved efficiency and higher Net Interest Margin driven by higher short-term interest rates resulted in disproportionate growth in profitability,” said Presidio Bank President and CEO Steve Heitel. “These factors along with a lower federal income tax rate make us optimistic about 2018.”

Financial Highlights

  • Total Loans Outstanding were up $9 million from the quarter ending September 30, 2017 and up $53 million for the year or 9%. Growth for the year was centered in Land and Construction Loans, up $32 million and Commercial and Industrial Loans, up $17 million. The growth in Land and Construction Loans represents the return to a more normalized level after a decline of $30 million in the category in 2016 due to the timing of projects financed. Growth in Commercial Real Estate loans of $8 million was modest compared to prior years and is related to intense rate competition in the category, which has slowed originations and accelerated prepayments. Loan Originations for the fourth quarter of 2017 were $69 million, up from $44 million in the third quarter. For the year, Loan Originations were $259 million, up from $221 million in 2016.
  • Total Deposits increased by $7 million from the quarter ended September 30, 2017. Total Deposits increased $41 million for the year or 6%. Demand Deposits declined $10 million in the fourth quarter but were up $37 million or 14.5% for the year. Demand Deposits now total 42% of total deposits. Money Market deposits declined by $21 million during the year. This was due largely to a $30 million escrow deposit that originated in 2016 and was distributed out in the third quarter of 2017.
  • Net Interest Income of $7.7 million in the fourth quarter of 2017 was down 2% from the third quarter of 2017 and up 23% from the fourth quarter of 2016. The third quarter of 2017 included recognition of $420 thousand in interest and fees related to collection of a non-performing loan. For the year, Net Interest Income was up 20% over 2016. Net Interest Margin decreased during the quarter to 4.11% from 4.34% in the third quarter of 2017 due to the aforementioned collection of interest and fees. Adjusted for that, Net Interest Margin was flat for the quarter. Net Interest Margin for the full year was 4.05%, up from 3.63% in 2016. Loan Yields for the quarter declined to 5.05% from 5.14% in the third quarter of 2017. For the year, Loan Yields increased to 4.91% from 4.65%. Cost of Funds and Cost of Deposits were essentially flat for the quarter and the year at 0.28% and 0.15% respectively.
  • Operating Expenses were essentially flat from the third quarter of 2017 and increased 7.6% from the fourth quarter of 2016. For the full year, Operating Expenses were up 8% primarily due to growth related increases in Salary and Benefits Expenses, an increase in Occupancy Expense due to the lease on our new Walnut Creek location that opened in the 2nd half of the year, and an increase in Loan Loss Provision Expense on the Undisbursed Loans due to a high level of unfunded Construction Loan Commitments. The expense growth is compared to revenue growth of 20% for the year. The Bank’s efficiency ratio improved from 68% in 2016 to 61.7% in 2017
  • Credit Quality remains strong with a Classified to Capital Ratio of 3.7% at December 31, 2017 which improved from 5.9% at December 31, 2016. The number of classified relationships has been reduced to two from five at the end of 2016. This improvement has been somewhat offset by an increase in Special Mention relationships from three at December 31, 2016 to eleven at December 31, 2017. Total Criticized and Classified Loans still represents only 3% of Loan Commitments and 4% of Loans Outstanding at December 31, 2017. At year end, the Bank had no Non-Performing Loans.
  • Diluted Earnings per Common Share were $0.09 for the quarter compared to $0.32 in the third quarter of 2017 and $0.19 in the fourth quarter of 2016. Diluted Earnings per Common Share were $0.87 for the year, up from $0.75 in 2016.
  • Book Value per Share increased to $12.29 per share at December 31, 2017 from $12.15 per share at September 30, 2017 and $11.31 per share at December 31, 2016.

“I am pleased that the Bank continues to demonstrate improved performance by executing its disciplined growth strategy,” said Presidio Bank Chairman and Founder, Jim Woolwine.

 
4(th) Quarter 2017 Financial Results

(Dollars in thousands, except per share amounts, unaudited)

 
Condensed Balance Sheet
         
12/31/2017   9/30/2017   Change   12/31/2016   Change
 
Cash and due from banks 7,613 10,677 (28.7 %) 6,035 26.1 %
Interest bearing due from banks   129,952       126,277   2.9 %   150,159   (13.5 %)
Total cash and equivalents 137,565 136,954 0.4 % 156,194 (11.9 %)
Investment securities 12,313 12,801 (3.8 %) 13,249 (7.1 %)
Loans, net of fees 626,282 617,269 1.5 % 572,780 9.3 %
Allowance for loan losses   (7,166 )     (7,166 ) 0.0 %   (6,868 ) (4.3 %)
Net loans 619,116 610,103 1.5 % 565,912 9.4 %
Premises and equipment, net 2,627 2,452 7.1 % 1,020 157.6 %
Other assets and interest receivable   22,237       23,312   (4.6 %)   11,128   99.8 %
Total assets 793,858 785,622 1.0 % 747,503 6.2 %
 
Non-interest-bearing demand 295,070 304,726 (3.2 %) 257,757 14.5 %
Interest bearing transaction 120,109 98,019 22.5 % 99,604 20.6 %
Money market and savings accounts 238,706 247,857 (3.7 %) 259,711 (8.1 %)
Time deposits   50,269       46,871   7.3 %   46,412   8.3 %
Total deposits 704,154 697,473 1.0 % 663,484 6.1 %
Borrowings 10,174 10,346 (1.7 %) 9,845 3.3 %
Other liabilities   4,767       4,001   19.2 %   6,812   (30.0 %)
Total liabilities 719,095 711,820 1.0 % 680,140 5.7 %
 
Common stock 65,960 65,585 0.6 % 64,122 2.9 %
Retained earnings 8,854 8,252 7.3 % 3,377 162.2 %
Other comprehensive income   (51 )     (35 ) (47.8 %)   (137 ) 62.5 %
Total shareholder’s equity   74,763       73,802   1.3 %   67,362   11.0 %
Total liabilities and equity   793,858     785,622   1.0 %   747,503   6.2 %
 
Book value per share
Book value per share $ 12.29 $ 12.15 $ 11.31
Total shares outstanding EOP 6,084 6,074 5,957
 
Capital Ratios
Tier 1 leverage ratio 9.7 % 9.9 % 9.1 %
Tier 1 risk-based capital ratio 9.8 % 9.8 % 10.1 %
Tangible common risk-based ratio 9.8 % 9.8 % 10.1 %
Total risk-based capital ratio 12.1 % 12.2 % 12.7 %
Condensed Statement of Income

(Dollars in thousands, except per share amounts, unaudited)

   
For the three months ended For the twelve months ended
12/31/2017   9/30/2017  

Change
Fav./
(Unfav.)

   12/31/2016  

Change
Fav./
(Unfav.)

12/31/2017   12/31/2016  

Change
Fav./
(Unfav.)

           
Interest income 8,236 8,362 (1.5 %) 6,736 22.3 % 30,799 25,993 18.5 %
Interest expense   483       472   (2.3 %)   455   (6.0 %)   1,819       1,775     (2.5 %)
Net interest income 7,753 7,890 (1.7 %) 6,281 23.4 % 28,980 24,218 19.7 %
Provision for loan loss   -       100   100.0 %   226   100.0 %   298       567     47.4 %
Net interest income after provision 7,753 7,790 (0.5 %) 6,055 28.0 % 28,682 23,651 21.3 %
 
Other income 287 268 7.3 % 189 51.9 % 948 698 35.8 %
 
Compensation and benefit expenses 2,814 3,036 7.3 % 2,657 (5.9 %) 11,525 10,671 (8.0 %)
Occupancy and equipment expenses 617 628 1.8 % 547 (12.7 %) 2,282 2,124 (7.4 %)
Data processing 388 346 (12.3 %) 340 (14.2 %) 1,366 1,287 (6.1 %)
Professional and legal 155 77 (102.0 %) 121 (27.9 %) 574 539 (6.4 %)
Other operating expenses   627       533   (17.7 %)   612   (2.5 %)   2,547       2,310     (10.3 %)
Total operating expenses   4,601       4,620   0.4 %   4,277   (7.6 %)   18,294       16,931     (8.1 %)
Net income before taxes 3,439 3,438 0.0 % 1,967 74.8 % 11,336 7,418 52.8 %
Income taxes   2,838       1,358   (109.1 %)   763   (272.0 %)   5,859       2,941     (99.2 %)
Net income   601       2,080   (71.1 %)   1,204   (50.0 %)   5,477       4,477   22.3 %
 
Earnings Per Share
Basic earnings per share $ 0.10 $ 0.33 $ 0.20 $ 0.91 $ 0.77
Diluted earnings per share $ 0.09 $ 0.32 $ 0.19 $ 0.87 $ 0.75
Average shares outstanding 6,009 6,001 5,906 5,979 5,788
Average diluted shares 6,328 6,277 6,146 6,259 5,987
 
Performance Ratios
Return on average assets 0.32 % 1.10 % 0.65 % 0.75 % 0.66 %
Return on average common equity 3.25 % 11.31 % 7.15 % 7.67 % 7.04 %
Net interest margin 4.11 % 4.34 % 3.45 % 4.05 % 3.63 %
Cost of funds 0.28 % 0.28 % 0.27 % 0.28 % 0.29 %
Efficiency ratio 57.4 % 57.0 % 66.1 % 61.7 % 68.0 %
 
Average Balances
Total assets 774,015 748,229 738,307 736,754 680,565
Earning assets 747,679 721,374 725,247 715,782 666,298
Total loans 608,584 612,493 537,641 594,624 534,930
Total deposits 684,233 660,790 655,149 649,793 596,303
Common equity 75,531 73,108 66,788 72,056 63,275
Condensed Balance Sheet (5 Quarter Data)

(Dollars in thousands, except per share amounts, unaudited)

                   
12/31/2017   9/30/2017   6/30/2017   3/31/2017   12/31/2016
       
Cash and due from banks 7,613 10,677 9,789 6,239 6,035
Interest bearing due from banks   129,952       126,277       101,532       88,944       150,159  
Total cash and equivalents 137,565 136,954 111,321 95,183 156,194
Investment securities 12,313 12,801 12,736 12,893 13,249
Loans, net of fees 626,282 617,269 603,689 578,033 572,780
Allowance for loan losses   (7,166 )     (7,166 )     (7,014 )     (6,868 )     (6,868 )
Net loans 619,116 610,103 596,675 571,165 565,912
Premises and equipment, net 2,627 2,452 1,335 1,005 1,020
Other assets and interest receivable   22,237       23,312       24,159       11,610       11,128  
Total assets 793,858 785,622 746,226 691,856 747,503
 
Non-interest-bearing demand 295,070 304,726 250,344 233,059 257,757
Interest bearing transaction 120,109 98,019 103,727 98,560 99,604
Money market and savings accounts 238,706 247,857 258,564 228,801 259,711
Time deposits   50,269       46,871       47,293       48,016       46,412  
Total deposits 704,154 697,473 659,928 608,436 663,484
Borrowings 10,174 10,346 10,152 9,860 9,845
Other liabilities   4,767       4,001       4,837       4,233       6,812  
Total liabilities 719,095 711,820 674,917 622,529 680,140
 
Common stock 65,960 65,585 65,185 64,801 64,122
Retained earnings 8,854 8,252 6,173 4,581 3,377
Other comprehensive income   (51 )     (35 )     (49 )     (55 )     (137 )
Total shareholder’s equity   74,763       73,802       71,309       69,327       67,362  
Total liabilities and equity   793,858       785,622       746,226       691,856       747,503  
 
Book value per share
Book value per share $ 12.29 $ 12.15 $ 11.75 $ 11.50 $ 11.31
Total shares outstanding EOP 6,084 6,074 6,069 6,030 5,957
 
Capital Ratios
Tier 1 leverage ratio 9.7 % 9.9 % 10.0 % 9.7 % 9.1 %
Common equity tier 1 capital ratio 9.8 % 9.8 % 9.6 % 10.1 % 10.1 %
Tier 1 risk-based capital ratio 9.8 % 9.8 % 9.6 % 10.1 % 10.1 %
Total risk-based capital ratio 12.1 % 12.2 % 12.0 % 12.6 % 12.7 %
Condensed Statement of Income (5 Quarter Data)

(Dollars in thousands, except per share amounts, unaudited)

 
For the three months ended
12/31/2017   9/30/2017   6/30/2017   3/31/2017   12/31/2016
       
Interest income 8,236 8,362 7,349 6,853 6,736
Interest expense   483       472       442       422       455  
Net interest income 7,753 7,890 6,907 6,431 6,281
Provision for loan loss   -       100       198       -       226  
Net interest income after provision 7,753 7,790 6,709 6,431 6,055
 
Other income 287 268 191 202 189
 
Compensation and benefit expenses 2,814 3,036 2,736 2,938 2,657
Occupancy and equipment expenses 617 628 518 520 547
Data processing 388 346 326 306 340
Professional and legal 155 77 203 139 121
Other operating expenses   627       533       586       801       612  
Total operating expenses   4,601       4,620       4,369       4,704       4,277  
Net income before taxes 3,439 3,438 2,531 1,929 1,967
Income taxes   2,838       1,358       939       725       763  
Net income   601       2,080       1,592       1,204       1,204  
 
Earnings Per Share
Basic earnings per share $ 0.10 $ 0.33 $ 0.27 $ 0.20 $ 0.20
Diluted earnings per share $ 0.09 $ 0.32 $ 0.26 $ 0.19 $ 0.19
Average shares outstanding 6,009 6,001 5,899 5,932 5,906
Average diluted shares 6,328 6,277 6,157 6,185 6,146
 
Performance Ratios
Return on average assets 0.32 % 1.10 % 0.90 % 0.69 % 0.65 %
Return on average common equity 3.25 % 11.31 % 9.03 % 7.09 % 7.15 %
Net interest margin 4.11 % 4.34 % 3.98 % 3.74 % 3.45 %
Cost of funds 0.28 % 0.28 % 0.28 % 0.27 % 0.27 %
Efficiency ratio 57.4 % 57.0 % 61.6 % 71.0 % 66.1 %
 
Average Balances
Total assets 774,015 748,229 711,847 712,119 738,307
Earning assets 747,679 721,374 695,297 698,171 725,247
Total loans 608,584 612,493 588,980 567,792 537,641
Total deposits 684,233 660,790 627,004 628,228 655,149
Common equity 75,531 73,108 70,741 68,760 66,788
         
Loans (5 Quarter Data)

(Dollars in Thousands, unaudited)

                 
12/31/2017   9/30/2017   6/30/2017   3/31/2017   12/31/2016
 
Commercial real estate 271,346 268,357 275,189 268,334 263,463
Land and construction 44,714 39,599 22,657 13,629 12,298
Commercial 197,748 194,884 187,537 176,073 180,412
Personal 16,295 21,292 23,008 30,992 31,352
Residential 34,174 34,389 33,671 27,077 30,510
Multifamily 63,024 59,764 62,634 62,898 55,593
Deferred loan fees (1,019 )   (1,016 )   (1,007 )   (970 )   (848 )
Loans 626,282 617,269 603,689 578,033 572,779
Allowance for loan losses (7,166 )   (7,166 )   (7,015 )   (6,868 )   (6,868 )
Net loans 619,116 610,103 596,675 571,165 565,912
       
Non-Performing Assets (5 Quarter Data)

(Dollars in Thousands, unaudited)

               
12/31/2017   9/30/2017   6/30/2017 3/31/2017   12/31/2016
 
Non-Accrual Loans - - 991   1,042 1,055
Non-Performing Loans (NPL) - - 991

1,042

1,055
Other Real Estate Owned - - - - -
Non-Performing Assets (NPA) - - 991 1,042 1,055
90+ Days Delinquent - - - - -
NPAs & 90 Day Delinquent - - 991 1,042 1,055
Quarterly Net Charge-offs - (51 ) 51 - -
 
NPAs / Assets % 0.00 % 0.00 % 0.13 % 0.15 % 0.14 %
NPAs & 90 Day / Assets % 0.00 % 0.00 % 0.13 % 0.15 % 0.14 %
NPAs / Actual Loans and OREO % 0.00 % 0.00 % 0.13 % 0.15 % 0.14 %
Loan Loss Reserves / Loans (%) 1.14 % 1.16 % 1.16 % 1.19 % 1.20 %
 
Net Interest Income (Quarterly Data)

(Dollars in Thousands, unaudited)

 
For the Three Months Ended
12/31/2017   9/30/2017
  Interest       Interest    
Average Income/ Average Average Income/ Average
Balance Expense Rate Balance Expense Rate
Assets:
Interest-bearing deposits $ 126,532 $ 375 1.18 % $ 96,029 $ 324 1.34 %
Federal Reserve and Federal Home Loan Bank stock 4,644 77 6.56 4,625 74 6.38
Investment Securities 7,919 32 1.61 8,227 32 1.56
Loans: (2)
Commercial 185,629 2,448 5.23 187,888 2,777 5.86
Land and Construction 42,055 655 6.18 32,792 524 6.33
Commercial Real Estate 267,166 3,334 4.95 274,847 3,278 4.73
Residential 33,500 414 4.90 33,997 420 4.90
Multifamily 62,002 712 4.56 60,424 690 4.53
Personal 18,232 189 4.12 22,545 243 4.28
Total Loans 608,584 7,752 5.05 612,493 7,932 5.14
Total Earning Assets 747,679 8,236 4.37 721,374 8,362 4.60
Allowance for loan losses (7,166) (7,149)
Cash and cash equivalents 8,441 8,639
Other assets 25,061 25,365
Total Assets $ 774,015 $ 748,229
 
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits $ 107,767 $ 41 0.15 % $ 103,364 $ 47 0.18 %
Money market deposits 241,802 143 0.23 248,786 137 0.22
Savings deposits 4,341 1 0.11 5,066 1 0.10
Certificates and other time deposits 49,965 87 0.69 47,612 76 0.64
Total Interest-bearing Deposits 403,875 272 0.27 404,828 261 0.26
Borrowings 10,161 211 8.24 10,327 211 8.11
Total Interest-bearing Liabilities 414,036 483 0.46 415,155 472 0.45
Noninterest-bearing deposits 280,358 255,962
Other liabilities 4,090 4,004
Total Liabilities 698,484 675,121
Stockholders' Equity 75,531 73,108
Total Liabilities and Stockholders' Equity $ 774,015 $ 748,229
Net Interest Income $ 7,753 $ 7,890
Net Interest Margin 4.11 % 4.34 %
Cost of Funds 0.28 % 0.28 %
Cost of Deposits 0.16 % 0.16 %
 
Net Interest Income (Annual Data)

(Dollars in Thousands, unaudited)

 
For the Twelve Months Ended
12/31/2017     12/31/2016
  Interest       Interest    
Average Income/ Average Average Income/ Average
Balance Expense Rate Balance Expense Rate
Assets:
Interest-bearing deposits $ 108,324 $ 1,183 1.09 % $ 117,087 $ 592 0.51 %
Federal Reserve and Federal Home Loan Bank stock 4,505 302 6.70 4,016 373 9.30
Investment Securities 8,329 128 1.54 10,265 143 1.39
Loans: (2)
Commercial 180,630 9,358 5.18 153,918 7,221 4.69
Land and Construction 26,482 1,647 6.22 33,487 1,754 5.24
Commercial Real Estate 269,499 12,838 4.76 238,263 11,205 4.70
Residential 31,615 1,500 4.74 28,281 1,186 4.19
Multifamily 61,246 2,795 4.56 48,843 2,248 4.60
Personal 25,152 1,048 4.17 32,137 1,272 3.96
Total Loans 594,624 29,186 4.91 534,930 24,884 4.65
Total Earning Assets 715,782 30,799 4.30 666,298 25,993 3.90
Allowance for loan losses (7,020) (6,452)
Cash and cash equivalents 8,839 9,272
Other assets 19,153 11,446
Total Assets $ 736,754 $ 680,565
 
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits $ 104,157 $ 183 0.18 % $ 88,330 $ 173 0.20 %
Money market deposits 239,776 515 0.21 237,624 541 0.23
Savings deposits 4,550 4 0.10 3,335 4 0.11
Certificates and other time deposits 47,569 273 0.57 47,003 195 0.41
Total Interest-bearing Deposits 396,052 975 0.25 376,293 912 0.24
Borrowings 10,066 844 8.39 14,088 863 6.12
Total Interest-bearing Liabilities 406,118 1,819 0.45 390,382 1,775 0.45
Noninterest-bearing deposits 253,741 220,010
Other liabilities 4,839 6,898
Total Liabilities 664,698 617,289
Stockholders' Equity 72,056 63,275
Total Liabilities and Stockholders' Equity $ 736,754 $ 680,565
Net Interest Income $ 28,980 $ 24,218
Net Interest Margin 4.05 % 3.63 %
Cost of Funds 0.28 % 0.29 %
Cost of Deposits 0.15 % 0.15 %
 

About Presidio Bank

Presidio Bank provides business banking services to small and mid-size businesses, including professional service firms, real estate developers and investors, and not-for-profit organizations, and to their owners who desire personalized, responsive service with access to local decision makers. Presidio Bank offers clients the resources of a large bank combined with the personalized services of a neighborhood bank. Presidio Bank is headquartered in San Francisco, California and currently operates five banking offices in San Francisco, Walnut Creek, San Rafael, San Mateo and Palo Alto. More information is available at www.presidiobank.com. Presidio Bank is a member of FDIC and an Equal Housing Lender.

This press release contains certain forward-looking statements that involve risk and uncertainties. These statements are identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “plan,” “estimate,” “project,” or similar expressions. The risks and uncertainties that may affect the operations, performance, development, growth projections and results of Presidio Bank’s business include, but are not limited to, the growth of the economy, interest rate movements, timely development by Presidio Bank of technology enhancements for its products and operating systems, the impact of competitive products, services and pricing, client-based requirements, Congressional legislation, changes in regulatory or generally accepted accounting principles and similar matters. Readers are cautioned not to place undue reliance on forward-looking statements which are subject to influence by the named risk factors and unanticipated future events. Actual results, accordingly, may differ materially from management expectations.